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AP Microeconomics
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economics
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ap
Instructions:
Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Average Total Cost (ATC)
Economics
Excess Capacity
Economies of Scale
2. The additional benefit received from the consumption of the next unit of a good or service
Long Run
Excise Tax
Marginal Benefit (MB)
Constant Returns to Scale
3. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Monopsonist
Least-Cost Rule
Decreasing Cost industry
Market power
4. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Marginal Resource Cost (MRC)
Monopoly
Income Elasticity
Shortage
5. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Resources
Four-firm concentration ratio
Subsidy
Excess Capacity
6. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Non-collusive oligopoly
Public goods
Production function
Shortage
7. The most desirable alternative given up as the result of a decision
Opportunity Cost
Income Effect
Comparative Advantage
Total Revenue Test
8. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Consumer surplus
Price floor
Scarcity
Marginal Cost (MC)
9. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Constrained Utility Maximization
Opportunity Cost
Perfectly elastic
Determinants of Demand
10. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Monopolistic competition
Substitution Effect
Derived Demand
Producer surplus
11. Ei = (%dQd good X)/(%d Income)
Income Elasticity
Subsidy
Market Equilibrium
Comparative Advantage
12. The output where ATC is minimized and economic profit is zero
Break-even Point
Determinants of Demand
Public goods
Economic Growth
13. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage
Economies of Scale
Marginal Resource Cost (MRC)
Utility Maximizing Rule
Spillover benefits
14. ATC = TC/Q = AFC + AVC
Determinants of Labor Demand
Marginal Revenue Product (MRP)
Average Variable Cost (AVC)
Average Total Cost (ATC)
15. Ed = 0 - no response to price change
Accounting Profit
Natural Monopoly
Specialization
Perfectly inelastic
16. Ed = (%dQd)/(%dP). Ignore negative sign
Total Fixed Costs (TFC)
Price elasticity
Economic Profit
Perfectly elastic
17. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Price elasticity
Total Fixed Costs (TFC)
Determinants of Demand
Fixed inputs
18. AFC = TFC/Q
Average Fixed Cost (AFC)
Total Welfare
Utility Maximizing Rule
Public goods
19. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Economic Growth
Inferior Goods
Productive Efficiency
Total Product of Labor (TPL)
20. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Law of Supply
Luxury
Average Product of Labor (APL)
Demand for Labor
21. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Marginal Productivity Theory
Average Product of Labor (APL)
Increasing Cost Industry
Constant cost industry
22. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Price inelastic demand
Normal Profit
Derived Demand
Decreasing Cost industry
23. 0 < Ei < 1
Monopoly long-run equilibrium
Marginal Product of Labor (MPL)
Resources
Necessity
24. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Constant Returns to Scale
Marginal Revenue Product (MRP)
Dead Weight Loss
Increasing Cost Industry
25. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Law of Increasing Costs
Production function
Marginal Productivity Theory
Perfectly competitive long-run equilibrium
26. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Normal Goods
Law of Diminishing Marginal Utility
Derived Demand
Monopoly long-run equilibrium
27. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Oligopoly
Price floor
Negative externality
Market Economy (Capitalism)
28. The difference between total revenue and total explicit and implicit costs
Productive Efficiency
Economic Profit
Non-collusive oligopoly
Price elasticity
29. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Constant Returns to Scale
Marginal tax rate
Surplus
Perfect competition
30. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Comparative Advantage
Law of Demand
Break-even Point
Economic Profit
31. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Economics
Total Revenue Test
Normal Goods
Market power
32. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Income Elasticity
Marginal Benefit (MB)
Total variable costs (TVC)
Allocative Efficiency
33. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Natural Monopoly
Implicit costs
Determinants of elasticity
Accounting Profit
34. Entry of new firms shifts the cost curves for all firms downward
Variable inputs
Decreasing Cost industry
Cartel
Short run
35. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Short run
Oligopoly
Total Fixed Costs (TFC)
Normal Goods
36. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Determinants of elasticity
Substitution Effect
Consumer surplus
Profit Maximizing Resource Employment
37. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Diseconomies of Scale
Price inelastic demand
Price discrimination
Marginal Analysis
38. The imbalance between limited productive resources and unlimited human wants
Market Equilibrium
Derived Demand
Scarcity
Shutdown Point
39. The sum of consumer surplus and producer surplus
Utility Maximizing Rule
Substitution Effect
Marginal Analysis
Total Welfare
40. Entry of new firms shifts the cost curves for all firms upward
Increasing Cost Industry
Market power
Demand for Labor
Cartel
41. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Incidence of Tax
Constant Returns to Scale
Implicit costs
Excise Tax
42. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Marginal Analysis
Positive externality
Utility Maximizing Rule
Total Revenue Test
43. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Monopoly
Perfect competition
Determinants of Demand
Marginal Productivity Theory
44. TR = P * Qd
Total Revenue
Economic Growth
Constrained Utility Maximization
Monopoly
45. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Economics
Price discrimination
Price Ceiling
Price elastic demand
46. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Four-firm concentration ratio
Producer surplus
Economies of Scale
Public goods
47. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Average Total Cost (ATC)
Spillover benefits
Monopolistic competition
Marginal Resource Cost (MRC)
48. Ei > 1
Price inelastic demand
Economic Growth
Constant Returns to Scale
Luxury
49. A good for which higher income decreases demand
Marginal Analysis
Determinants of Labor Demand
Least-Cost Rule
Inferior Goods
50. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Law of Supply
Natural Monopoly
Price elasticity
Cartel
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